This morning, Germany announced its latest inflation figures, including CPI year-on-year for 2023 and month-on-month for November 2023.

The numbers showed that inflation had risen by 3.7 percent in December 2023 YoY, and that Germany’s harmonised index of consumer prices had also climbed by 3.8 percent YoY and by 0.2 percent MoM from November 2023.

In line with expectations 

Forecasts for today’s inflation figures were grim but expected, with Germany’s Statistisches Bundesamt predicting around 3.7 percent inflation YoY prior for 2023, up significantly from 3.2 percent in 2022.

However, the month-on-month December figures arguably give a more accurate understanding as to where inflation is at now in Europe’s biggest country by GDP. But these figures were up, too: at 0.1 percent for December 2023, compared with -0.4 percent in November.

The sad significance of the Germany CPI figures

As Europe’s largest and bellwether economy, Germany always matters – but arguably they are even more important right now.

A rise in inflation typically means less purchasing power for consumers, whose spending (or lack thereof) has a direct impact on the economy.

According to the European Commission, unemployment is expected to increase marginally to 3.2 percent in both 2024 and 2025. And inflation was expected to be 3.1 percent in 2024 – quite a bit lower than this morning’s figures.

If Germany cannot get its inflation under control this year, it runs the risk of falling into a stagflation later in the year – and potentially dragging the rest of Europe down with it.

Not to mention that the interest rate cuts every consumer in Europe is so pining for will only drift further out of reach, the higher inflation goes. (Read our story on an ECB member saying ‘I cannot imagine we’ll talk about cuts yet’ for more context.)

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